Value stocks can still spur investors gains

Article Excerpt

For our subscribers, we’ve long highlighted the benefits of “value investing.” As an investment style it has, over time, performed better than the overall market. The MSCI World Value Index, for example, has outperformed the MSCI World Growth Index by 2.1% per year since 1975 (the start of both indexes). Remarkably, the value index has also had lower volatility (risk) than the growth index. Value investors would normally look for stocks that have low valuations when prices are compared to earnings, book value or cash flow. Growth investors would focus on companies with faster revenue and profit growth and less so on valuation. Value investing has been out of favour around the globe for the past decade. In each of the major markets highlighted in the table, growth has beaten value over the last 10 and 5 year periods. Although the annual return differences may not look very large, these are annual returns, which over longer periods of time, make for much…

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